A Snapshot Of Of Constant Contact’s Business

Constant Contact provides engagement marketing tools, and its revenue stood at $252 million in 2012. It had around 555,000 unique paying customers located across more than 180 countries at the end of 2012.

The company’s growth drivers include faster customer base growth, higher revenue per customer and acquisitions to enhance technology and product offerings. Over 29 million registered small businesses and non-profits in the U.S. represent the target market for the company.

Its monthly retention rate of unique paying customers stood at around 97.8% in 2012. While the market potential is huge, Constant Contact faces competition from a large number of companies such as AWeber, iContact, Groupon and Surveymonkey.com.

Constant Contact (NASDAQ:CTCT) provides engagement marketing tools such as email marketing, social media marketing, event marketing, mobile storefronts, local deals and survey products for small businesses, associations and non-profits. Revenue from email marketing product alone accounted for around 85% of the total revenue in 2012.

In this article, we summarize Constant Contact’s business to understand its market potential, customer base, key growth drivers and key competitors. The market potential for Constant Contact’s products is huge on account of a large number of small businesses in the U.S. coupled with international growth opportunities. Moreover, the company enjoys excellent customer loyalty and a favorable lifetime revenue per unique customer. However, a fragmented competitive landscape in its different product markets represents a key headwind for the company.

How Does Constant Contact Market Its Products And What Is The Market Potential?

Constant Contact markets its products using several methods such as online advertising, partner relationships, radio and television advertising, brand awareness and referrals. The potential market for Constant Contact is significant since there are more than 29 million registered small businesses and non-profits in the U.S. Additionally, small businesses outside the U.S. can also be tapped by the company for future growth.

What Is The Customer Base?

At the end of 2012, Constant Contact had around 555,000 unique paying customers located across more than 180 countries. Around 10% of the revenues were derived from countries outside the U.S. in 2012.

Since the company mostly caters to small organizations, it has very low customer concentration as the top 100 customers accounted for less than 1% of total revenue in 2012. Constant Contact enjoys a high degree of customer loyalty as its monthly retention rate of unique paying customers was recorded at around 97.8% in 2012. It also forecasts lifetime revenue of $2,000 per unique customer, which bodes favorably for its outlook.

What Are The Key Financials Metrics?

Metric

2011

2012

Revenue (in $ thousands)

214,420

252,154

Gross margin

71.3%

70.8%

Operating margin

4.7%

6.2%

Net margin

11%

5.1%

End of period number of unique customers

500,000

555,000

What Are The Major Growth Drivers?

We believe Constant Contact’s future growth will be driven by the following factors:

Growth of customer base: We believe there is significant scope for Constant Contact to expand its customer base as the market potential for its products is huge. Constant Contact can also expand geographically by hiring more regional development directors and opening more marketing offices outside of the U.S. The expansion of partner distribution channels could help the company in reaching out to more prospective customers.

Increase in revenue per customer: Constant Contact has an edge over its competitors as it offers a broad range of products and services, which are unmatched by many of its peers in the industry. The company is leveraging this competitive advantage to cross-sell its products and bundle its products on a common platform. This could help the company increase its average revenue per customer.

Acquisitions to pursue growth: Constant Contact has acquired various companies in the past such as SinglePlatform and CardStar to bolster its technology and product offerings. We expect it to continue this strategy in the future.

Comments

Constant Contact is indeed a great platform for SME to improve their relationship with end customer.

Their marketplace is also filled with great integration products such as Mobile signup solution application allowing shop owners and retailers to be able to collect email and contact details of customers and visitors thanks. This data collected on a tablet will then be auto-sync with the Constant Contact list.

Main Target for those SMEs and retailers is to deliver great content and special promotion to their customers.

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